Only 8% of councils pass the mortgage affordability test
New research from London’s expert mortgage broker stresses the importance of joint income as just 8% of local authorities are home to an average house price that falls within the threshold of affordability.
To conduct the research, Alexander Hall analysed average earnings data across areas in England before examining whether or not homebuyers stood a chance of climbing the property ladder. This was based on securing a mortgage with a 15% deposit with an average income multiple of 4.5x.
From this, Hall discovered that a mere 8% of local authorities currently offer affordable mortgage deals to 4.5 times the average income of individuals. According to the most recent statistics, the average house price in England is currently £305,000, with an annual increase of 2.4%.
On an arguably more depressing note, Hall found that in five out of 12 British regions, there isn’t a single council where an individual home buyer would secure a mortgage based on 4.5 times earnings versus the average price of a home.
These include the East Midlands, East of England, London, South West and South East.
What’s more, even with a joint average income, the average home buyer in the capital city can still only afford to purchase in 30% of local authorities.
Meanwhile, the picture is looking a tad more positive in Scotland. Here, the degree of potential mortgage eligibility – the country ranks top, where 35% of all councils offer an average house price that falls within the lending criteria of 4.5 times the average income.
‘High interest rates have somewhat dampened property market performance in recent years and we’re only now seeing house prices start to recover with respect to consistent levels of positive growth,’ Alexander Hall said. ‘Despite this, property values remain close to historic highs and affordability continues to be a key issue for many homebuyers. This is down to the fact that earnings growth simply hasn’t been sufficient enough to help bridge the gap and so for many, what they are able to borrow isn’t sufficient enough to cover the value of the home they wish to buy.’
Hall continued: ‘As a result, we’re seeing more lenders continue to think outside the box and drive innovation within the sector in order to assist homebuyers with their aspirations of homeownership. This includes initiatives such as enhanced affordability, allowing some borrowers to potentially secure up to 5.5 times their income.’
A full list offering the breakdown of councils able to offer affordable homes mortgages can be found in full here.
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